Full screen recommended.
"Housing Crash Begins! We Just Witnessed
Something That Hasn’t Happened Since 2008"
by Epic Economist
"The disaster we’re about to witness didn’t have to happen. The desperate attempt to control this horrifying inflation spiral is absolutely crushing the US housing market – and we are all going to feel the impact of the coming crash. In recent years, irresponsible monetary policies were put in place, fueling an unprecedented inflation boom that sent housing costs to extreme levels. Now, policymakers at the central bank and politicians in Washington are scrambling to tame the beast they unleashed by themselves. But everyone knows that rapidly rising interest rates are going to wreak havoc on financial markets, and most notably, in the housing sector. When mortgage rates soar higher, more and more potential homebuyers are pushed to the sidelines.
Fewer buyers mean fewer sales, which translates into downward pressure on home prices. This is basic economics, you don’t need to be an expert to understand any of this. But it seems that Fed officials are either clueless or very much aware that what they are doing is going to be exceedingly destructive to the U.S. economy as a whole but they’re still waiting for some magical solution to come about to dig us out of this hole. Once again, the housing market is in shambles, and we’re on the cusp of a housing collapse that will make the 2008 crash look like a Sunday picnic.
Do you remember the pain that we all went through in 2008? Well, a similar scenario is now unfolding right before our eyes, only this time, things are about to get a whole lot worse. In fact, something that hasn’t happened in the market since 2008 actually happened again last week. According to data released on Thursday, the average interest rate on a 30-year fixed-rate mortgage rose above 6 percent for the first time since the financial crisis.
The truth is that higher interest rates predominantly hurt low-and-middle-income Americans while the wealthy can still afford to purchase homes because many of them don’t even need mortgages, they can just buy them with cash. But for the rest of us, aggressive rate hikes make a world of difference. Each and every increase adds hundreds of dollars or more to the monthly cost of a potential buyer’s mortgage payment, slowing what was a red-hot market not so long ago. Since the start of the year, the average mortgage payment has surged 38.5% to $2,306 from about $1,700 in January. With mortgages weighing even more on already expensive home prices, mortgage demand is drying up really fast right now. Numbers released by the Mortgage Bankers Association showed that the number of applications plunged by nearly 30% compared to a year ago. And the number of applications to refinance mortgages has fallen off a cliff, with refinancing activity collapsing over 80%, MBA revealed in a new report.
The chief economist at Redfin, Daryl Fairweather, says that the ongoing meltdown is the deepest since the previous crash. “This is the sharpest turn in the housing market since the housing market crash in 2008,” she outlined in a recent interview. At this point, an estimated 39 million would-be buyers are being forced to continue renting. At the same time, more than one in 10 renters across the country are behind on rent. We have to remind ourselves that very rough weather is headed our way, and a number of crises may simultaneously burst this winter. The wise will prepare in advance, but those that are foolish will do nothing because they still believe that our leaders have everything under control."
No comments:
Post a Comment